- Credit card company Discover Financial said it enjoyed a nearly $800 million windfall last week thanks to its investment in card payment processing company Marqeta, which sold shares to the public for the first time in a June 9 initial public offering. The newly issued Marqeta shares rose 13% on their first day of trading to close at $30.52.
- At that per-share price, Discover said its investment in Marqeta was worth $801 million, with a cost basis for the investment of just $8.6 million, according to a filing the company made with the Securities and Exchange Commission on Thursday. Discover owned a 5.4% stake in Marqeta before the offering and was expected to retain that ownership following the IPO, according to a separate Marqeta SEC filing for the offering.
- Discover said in its filing that it would use the money to “accelerate certain marketing and non-marketing growth investments, beginning in the second quarter of 2021.” The company said in April that it would focus operating expense increases on marketing for the remainder of this year.
The Riverwoods, Illinois-based company’s management is positioning the business to attract more consumer demand as the U.S. economy heads for an upsurge with the easing of restrictions tied to the COVID-19 pandemic. With a rise in vaccinations against the deadly virus, Americans are expected to increase spending as they resume normal routines. Economists expect the activity to result in pent-up demand unleashing an economic boom.
“With the world opening up, we’re looking to stay top of mind for consumers as they spend more,” said Discover Chief Marketing Officer Kate Manfred in a statement provided by the company via email.
While the Discover’s spending on marketing was lower in the first quarter this year relative to early last year, Discover CEO Roger Hochschild told analysts during a first-quarter earnings call in April that the company would increase that spending for the rest of the year, while most other expenses remained flat this year relative to last year. It’s part of a plan to acquire more cardholders, Hochschild told Bloomberg.
Chief marketing officers at other companies have similar plans, according to a survey conducted recently by the Wall Street Journal.
The Marqeta windfall will speed up that spending for Discover, according to the SEC filing by Discover. Asked about what that will mean for the company, a spokeswoman provided the insights from Manfred. “Our incremental marketing investments continue to amplify” Discover’s products and brand “in a highly competitive environment by focusing on high-performing channels driving increased reach,” Manfred said in the statement.
Asked what particular channels the company will focus its increased marketing efforts on, she said Discover is already heavily weighting its brand marketing to digital channels and will increase programmatic online video, connected TVs, online advertising and social media, among other channels.
Manfred is gearing up for increased marketing spending after being promoted into her current role in January. She replaced former Chief Marketing Officer Julie Loeger, who left the company at the end of last year, according to the spokesperson. Loeger, who had worked at Discover for more than 25 years, became chief growth officer at online marketplace company Ebay in January, according to her LinkedIn profile.
The marketing changes are coming fast at Discover. In May, it appointed a new lead creative ad agency, tapping TBWA\Chiat\Day LA for the role, according to advertising trade publication Ad Age.